MARKET SNAPSHOT: U.S. Stocks On Track For Worst Session In 10 Months On Trump Worries

U.S. stocks sold off on Wednesday with all major indexes poised for their worst day in 10 months as turmoil in Washington cast doubt on whether President Donald Trump can push forward with the pro-growth agenda that has helped drive stocks to records.

The continuing political uncertainty sent the S&P 500 index down 38 points, or 1.6%, to 2,362, with eight of its 11 main sectors trading lower. Financials, which had been among the biggest beneficiaries of Trump's market-friendly agenda, were the biggest losers, down more than 3%.

The Dow Jones Industrial Average dropped 336 points, or 1.6%, to 20,645. Goldman Sachs Group Inc.(GS) and J.P. Morgan Chase & Co.(JPM), were pacing the losses.

The Nasdaq Composite Index , which closed at a record for a second session in a row on Tuesday, declined 138 points, or 1.3%, to 6,031.

"Today we are witnessing a typical flight to safety that comes with fear," said Ian Winer, head of equities at Wedbush Securities. "On a fundamental level investors are constantly assessing the likelihood of tax reform and regulatory reform into the multiple they put on the market. Whenever more questions arise on timing of these policies, the market tends to sell off because we add risk," he said.

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Also read: Bernanke: Always 'puzzled' by way markets ignore political risk until 'last moment' (http://www.marketwatch.com/story/bernanke-always-puzzled-by-way-markets-ignore-political-risk-until-last-moment-2017-05-17)

The CBOE Volatility Index , which measures implied volatility on the S&P 500, spiked 32% to 14.13, on pace for its biggest daily climb since September.

"Investors are more nervous today than they were yesterday so you are seeing a big bid in the bond market. So funds are reducing equities slightly today and moving into safety," Winer said.

Weakness for global equities came after the New York Times reported that Trump in February asked then-director of the Federal Bureau of Investigation, James Comey, to stop his investigation (http://www.marketwatch.com/story/trump-asked-comey-to-drop-flynn-investigation-report-2017-05-16) into former National Security Adviser Michael Flynn.

The report also prompted some House Republicans to call for a further investigation and for the FBI to hand over documents related to communications between the president and Comey, whom Trump fired earlier this month.

"The big selloff in banking stocks suggests that the market now believes that no tax or regulatory reforms are coming," said Michael Antonelli, equity sales trader at Robert W. Baird & Co.

Read:How to tell if the tide has finally turned on this Trump rally (http://www.marketwatch.com/story/how-to-tell-if-the-tide-has-finally-turned-on-this-trump-rally-2017-05-17)

Perceived haven assets rose, with gold up 1.8% (http://www.marketwatch.com/story/gold-rises-and-tries-for-fresh-2-week-high-as-trump-worries-spark-haven-demand-2017-05-17) to $1,258 an ounce. Demand for U.S. government bonds pushed the yield on the 10-year Treasury note to 2.22%, its lowest yield in about three weeks (http://www.marketwatch.com/story/treasury-yields-sink-as-trump-fbi-controversy-intensifies-2017-05-17).

"This isn't about who is right or wrong; it is about a concern that a number of things could derail the future of economic growth that were not present a month ago. Whether it is oil prices, slowing inflationary growth, or a fear of 'nothing done' in Washington, investors are beginning to make some portfolio adjustments," Kevin Giddis, head of fixed-income capital markets, said in a research note.

Giddis expects investors to sell stocks and move to bonds for now although the shift isn't likely to be significant unless there is further destabilizing news out of the nation's capital.

The Japanese yen , another asset investors typically turn to in times of stress, rose against the dollar, with the greenback buying Yen111.02, compared with Yen113.12 late Tuesday.

The dollar also slumped against other major rivals (http://www.marketwatch.com/story/asian-markets-mostly-down-as-dollar-continues-to-fall-2017-05-16), with the ICE Dollar Index falling to its lowest level since before the U.S. presidential election in November. It hit an intraday low of 97.55.

The probability of a Trump impeachment has gone up after the recent events, analysts noted, with bookmaker Paddy Power's odds reflecting a 33% chance it could happen. An impeachment requires the backing of two-thirds of the Republican-controlled Senate.

Read:Trump impeachment? Bookies odds increasingly point to an early exit (http://www.marketwatch.com/story/trump-impeachment-odds-increasingly-point-to-an-early-exit-2017-05-17)

Also read:Here's why stocks could rally if Trump heads for the exit (http://www.marketwatch.com/story/heres-why-stocks-could-rally-if-trump-heads-for-the-exit-2017-05-12)

After the market closes, Cisco Systems Inc.(CSCO) earnings are on deck. Cisco shares have risen 2.5% so far this week, rising alongside other cybersecurity and antivirus shares after the "WannaCry" ransomware attack that hit more than 200,000 computers world-wide.

Shares of Advanced Micro Devices Inc.(AMD) slumped more than 12% after the chip maker late Tuesday laid out its new growth plans (http://www.marketwatch.com/story/amd-gains-after-laying-out-plans-for-growth-in-servers-2017-05-16).

Oil blues:Oil prices (http://www.marketwatch.com/story/oil-prices-under-pressure-amid-fresh-concerns-about-us-supply-2017-05-17) rose 0.7% to $49 a barrel, after trading as low as $48.03 earlier in the day.